Peoria, Ill.-based Caterpillar last week reported record second-quarter sales and revenues of $11.35 billion from $10.60 billion, a 7-percent increase over the same period last year. The company also reported profit of $823 million, or $1.24 per share, for the second quarter ending June 30.
“We’re pleased with second-quarter sales and revenues which demonstrated the strength of our global reach,” said chairman and CEO Jim Owens. “Sales growth outside of North America largely offset the impact of the planned decline in North American dealer machine inventories, the severe drop in demand for on-highway truck engines and weakness in North American construction markets. Sales and revenues were up 7 percent from last year’s second quarter. The strength of economies outside of North America, our broad global footprint and growth in diversified service businesses all helped us deliver higher sales.”
Sales and revenues of $11.35 billion increased $751 million from the second quarter of 2006. The increase was a result of a $943 million improvement in sales volume outside North America; $411 million of sales from Progress Rail, which was acquired in June of 2006; $198 million of higher sales related to the impact of currency; $168 million of improved price realization, despite an unfavorable geographic sales mix; and $94 million of additional financial products revenues.
The increase was partially offset by a $1.06 billion decline in physical sales volume in North America, which was largely a result of the following three factors:
· Dealer Machine Inventories — North American dealers reduced inventory, as planned, by about $800 million during the second quarter of 2007 as compared with a $200 million reduction in the second quarter of 2006. The improvement this year is a joint effort with dealers, is a key element of the Cat Production System and is consistent with Caterpillar’s goal of improving velocity throughout the value chain.
· On-highway truck — a $366 million drop in on-highway truck engine sales. Weak construction activity in North America, notably U.S. housing related markets, resulted in lower sales.
· Profit of $823 million was down $223 million from the second quarter of 2006, and profit per share decreased $0.28 — from $1.52 per share in the second quarter of 2006 to $1.24.
Caterpillar is maintaining its full-year outlook for profit per share. The company expects full-year sales and revenues of about $44 billion, up from $41.5 billion in 2006, and profit in a range of $5.30 to $5.80 per share, up from $5.17 per share in 2006.
“With six months under our belt we’re confident in the top-line and have adjusted our expectation for sales and revenues to about $44 billion,” said Owens. “While we have more work to do on costs, we are maintaining our per share profit outlook of between $5.30 and $5.80 for the full year. We expect core operating cost comparisons to improve and are taking action to lower discretionary spending. However, we'll continue to aggressively implement the Cat Production System. We know that CPS deployment and 6 Sigma discipline are the keys to realizing our 2010 targets for safety, quality, velocity and PPS growth.
“Given the substantial investments that we are making in new product technology, expanded capacity, CPS deployment and selective acquisitions, I'm more confident than ever that we'll deliver solid top-line growth and our goal of 15-20 percent average annual growth in PPS to 2010. Our leadership team is committed to delivering these results, and we have a good line of sight to achieving these goals.”
With 2006 sales and revenues of $41.52 billion, Caterpillar is a leading international manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services.